FX snapshot – US Dollar Index, GBP/USD, NZD/USD, USD/CAD

The dollar continues to sell off, yet the existence of major support means a reversal is likely.

Dollar and pound
Source: Bloomberg

US dollar short-term double-bottom in play

The dollar is having another strong morning today, with price breaking above the crucial $97.05 resistance level. This comes off the back of a failed attempt to create a new low and given that a break above $97.05 means a bullish double-bottom has been created. The projected target from this double-bottom is $97.96. Given that I am generally bullish on the USD over the medium-term, this short-term bullish outlook fits and thus I would expect us to see further gains today.

In the near-term, an intraday respect of the $97.05 level as new support would be a great signal of another move higher. Be aware that there is a major cluster of moving averages (50, 100 and 200) which could provide resistance. Yet while price is above $97.05, I remain bullish and expect further gains today.

Given the broadening formation in place (higher high/lower low), the exit from this pattern is becoming less clear for the medium-term.

GBP/USD inside key resistance zone

GBP/USD saw Friday’s triangle breakout lead to another move back into the shaded resistance zone that I have been watching recently. This zone has provided the tops of each period of buying that has occurred in the last month. With that in mind, I am bearish as long as price remains below the upper threshold ($1.5654).

We appear to be setting a bearish engulfing from that resistance level and thus a move below near-term support ($1.5641) would give me confidence of another move lower towards $1.559, and possibly $1.5533 in the near-term.

Further losses likely for NZD/USD today

The NZD/USD pair has been on a very clear downtrend over recent months, yet the past few weeks have seen somewhat of a consolidation period, with little ground made up in either direction. There is one level which has been relatively important to near-term price action as it represents a middle rotational point which forms both support and resistance.

At $0.656, price rarely passes through, and when it does it typically comes back to retest it as new support or resistance. Given that we have seen price break down through this level on Friday and that it is now joined by the 50-period SMA, I expect the pair to move lower towards the $0.6498 in the near future. Of course, any intraday close above $0.656 would point towards the $0.662 and $0.664 area.

USD/CAD broadening breakout in play

USD/CAD appears to be breaking out of the broadening formation that has been in place over the past week. However, the important thing here is a move above C$1.3156 rather than just a trendline break and thus I am waiting to see if that level is broken. If it is, then I will expect to see a return of the bullish price action that dominated July.

With the MACD histogram rounding off alongside a somewhat toppy stochastic, there is a distinct possibility we could start to sell off from this major resistance level. Thus I am waiting to see if price can break above $1.3103 to bring back the bullish theme, or else a possible near term sell off.

Should the latter occur, I would expect it to be temporary as I do believe that we will see the bulls return back into prominence once more very soon.

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